Activate or Die: 3 Keys to User Activation for SaaS (Part 1)

This post is Part 1 in our 500 Distribution series on activation for SaaS, by 500 Distribution Hacker-in-Residence Justin Mares. Get more growth goodness with Distrosnack, our daily email of bite-sized growth + GIF awesomeness.

Imagine you’re living the marketer’s dream.

You’re acquiring hundreds, even thousands of customers every day because your product and marketing are just that awesome. Your team, investors and family are pumped, and there’s a feeling of excitement as your user metrics go up every day.

However, all this means nothing if you ignore one key metric – activation.

Activation is one of the most important metrics for any SaaS company. It’s the second Big A in AARRR, and it’s a measure of the key action your users need to take to get value from your product, and how many users take that action.

This graph shows what happens when you are crushing user acquisition but failing to activate users.

Viddy, the formerly popular video sharing app, was a viral app that grew rapidly by getting a user to sign up using their Facebook account and then sharing this action with their friends.

However, Viddy never nailed the activation piece. Many of the users that signed up never came back to the app again. Thus, when Facebook put a stop to their friend-blasting user acquisition approach, they went into a tailspin from which they haven’t recovered.

The activation problem only gets bigger when you venture beyond consumer products.

40-60% of users who sign up for a free trial of your software application will use it once and never come back again.

Well, that sucks, but for better or worse, this is normal in SaaS.

In today’s post, we’ll cover 3 keys to user activation for SaaS and a couple of ways you can improve your activation rates right now.

1. Acquisition vs. Activation

Most SaaS companies are (rightly) concerned with user acquisition but fail to pay adequate attention to activation.

What few realize is that activation plays a major role in user acquisition itself.

Imagine that you (and your competitors) can spend $10 on Facebook to get one user signup, and that you make $20 for every customer you have.

Let’s also say that half of your users that sign up for a trial will not activate – they’ll never experience the key action that separates your product from the other SaaS tools out there, and won’t become a fully featured user.

So, overall, you’re breaking even on your marketing spend: $20 x 50% of users that activate equals the $10 you spent on Facebook.

If you can boost this activation number even just to 60%, your marketing channel suddenly becomes profitable, not just break-even.

That increase also opens up new audience and ad targeting options, and allows you to profitably scale your advertising.

Just like you’d optimize your ads, you should be optimizing your activation process to successfully onboard as many users as possible, because activation is part of acquisition.

2. Activation in Steps

Improving your activation rate is an ongoing process that should be done along with other conversion rate optimization (CRO) efforts.

CRO is simply the process of measuring your marketing funnel and running tests to improve the number of people that move between each step. For example, here’s a funnel from Patrick McKenzie’s Bingo Card Creator:

As you can see, Patrick has broken down his activation funnel into 5 discrete steps, with some small number of users dropping off at each stage in the funnel.

If he were to focus on improving his activation rate, he’d likely run A/B tests to try and get more users customizing lists of bingo cards they’ve created (since that’s the step with the largest dropoff rate).

Activation can be broken into multiple steps, which lets you drill down on precise drop-off points that need the most fine-tuning.

This involves looking at the whole funnel and improving the areas that are performing the worst, in other words, the steps that the most users fail to complete.

In the case of Bingo Card Creator above, you can see that the greatest drop-off occurs when users try to go from creating a list to customizing one. Only 82% of users complete this step, compared to 86%+ across the rest of the business.

For a company like Buffer, these steps might look like the below:

Sign up for a Buffer account

Connect 1 social account

Connect all your social accounts

Schedule your first post through buffer

Check your social analytics dashboard

3. Kill Friction Now

Improving activation is a combination of reducing product friction, building in engagement reminders, and employing triggers based on customer actions.

Here are a few simple ways to reduce friction (remember, test for yourself!):

Published by Susan Su

Susan is part of the 500 Startups Distribution Team, specializing in content and email marketing. She has previously run marketing and growth for Inside Network (acquired byWebMediaBrands in 2011), AppSumo.com, and Ramit Sethi.